Dale Investigates: Rent-to-Own Agreements

For some people, rent-to-own agreements can seem like a great way to purchase furniture, electronics, or other items they might not otherwise be able to afford. But watch out for tricky language and high payoff rates. All too often, consumers get caught in rent-to-own agreements that end up costing them a lot more than they bargained for.

That’s what happened to Pat Fitzpatrick. Pat bought beds for her grandchildren and some dining room chairs on a rent-to-own agreement. The contract said that if she made all of her payments in first 101 days and paid off the $967 cost of the furniture, she would have no fees.

Pat made her payments, but at the end of the payoff period, when she called to confirm her payoff, she found that she was stuck with a much higher bill than she anticipated, nearly $3,000! She spoke to the finance department, and she was told that this bill was due to added fees, since she had failed to pay off the value of the furniture in the allotted period.

That’s when she called TrustDALE.

Pat gave our producer Marnie authorization to talk to the finance department on her behalf. After several calls and some poor customer service, this is what Marnie was told: Pat had made her payments, but those payments were not enough to pay off the value of the furniture. If she wanted to pay off the furniture in the allotted 101 days, she would have had to call the company and make extra payments.

In other words, the payments were specifically structured so that even when she made her payments on time, Pat would miss the payoff period and owe the “added fees”.

In this case, we were able to help Pat out. The furniture company realized that this looked bad for them, so they agreed to forgive the fees.

But there are thousands of Americans out there who don’t have TrustDALE to call on their behalf. How many of these people are caught in this trap, making payments on time and still missing their payoff date?

There is an ongoing legal debate as to whether rent-to-own agreements should be considered a lease (that is, a rental, like anything else you can rent) or a credit instrument (like financing a purchase). Different courts in different states have ruled both ways. Some federal agencies have even categorized these agreements as predatory lending practices, only to backtrack and remove that categorization after further pressure.

In theory, there is nothing wrong with a rent-to-own agreement. It allows a consumer who may not have the necessary credit for traditional financing to purchase an item without making the full payment up front. Ideally, a consumer would pay the rental fees on time, and those fees would be applied to the final purchase price. If the payments are made on time, the product becomes the property of the purchaser.

The problem comes with tricky contracts that seem designed to trap the consumer.

When a contract is written so that you can make your monthly payments but still miss the payoff date, that looks like a scam to us. The only advice we can give to consumers is to read your contract carefully. This is a shameful practice, and financing companies should not be engaging in it. But in the end, the best protection is just to do your due diligence.

Of course, if you have a problem that you’ve tried to solve with a business, but they just aren’t responding, you can contact us. Most of the time, we can get businesses to do what’s right.

But what’s even better than getting a company to do what’s right after the fact is working with a business that does what’s right from the very start. When you work with a TrustDALE certified business, you know that you are dealing with an honest business that is committed to customer service. And every TrustDALE certified business is backed by Dale’s 7-point investigative review process and Make-it-Right™ Guarantee.